Latest Canadian oil patch takeover mirrors new production value

The latest Canadian oil patch takeover confirms that assets are now securely fixed above C$60,000 per flowing daily barrel.

Kereco Energy, in picking up Chamaelo Energy for C$332 million in shares, adds 4,600 barrels of oil equivalent per day (divided equally between light crude and natural gas) at a cost of C$66,416 per boe of production and gained 14.03 million boe of proved plus probable reserves for C$21.78 per boe.

Kereco also adds 130,000 net undeveloped acres valued at C$26.2 million.

Conclusion of the transaction will bump Kereco’s production to 10,500 boe per day and as high as 15,000 boe per day in 2007, making Kereco one of the few companies in that category in Canada, along with 280 drilling prospects on 220,000 net acres.

Entering the ranks of intermediate producers is startling growth for Kereco who made its debut in early 2005 at 900 boe per day.

Chief Executive Officer Grant Fagerheim said the new size will enhance Kereco’s ability to consider various acquisitions and pacts with royalty trusts, although he has no plans to convert into a trust so long as the new asset package lends itself to growth.

As part of the deal, Kereco will sell production of 120 boe per day and reserves of 200,000 boe for C$6.6 million to a group of Chamaelo managers as the cornerstone of a new private company.

Chamaelo started trading only last June, although it has stumbled recently because of soft gas prices, production issues and a relatively heavy debt-load.

—Gary Park